Prozac and Home-Equity Loans

The financial crisis gripping the world right now started with the bursting of the sub-prime mortgage bubble in the US last year (explanation here). Naturally, the financial industry players – banks, brokers, insurers, etc. – took most of the rap for creating this crisis, and rightfully so.

But what about the people who actually borrowed the money? Aren’t they at least partly to blame for taking these risky loans?

Adam Hanft has an interesting theory: Americans have been medicated with anti-depressant drugs to a level that caused them to accept irrational levels of risk. Not sure about that $500,000 loan for the new house you want so much? No worries, just pop a Prozac into your mouth and suddenly the loan doesn’t look so risky. Drug-induced confidence might indeed be partly responsible for the irrational behaviour of many of these home-equity borrowers.

Now, isn’t that a depressing thought?

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